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SPECIAL REPORT:  FY 2006 President's Budget -- A Quick California Glance -- February 7, 2005 - 5:00 p.m.

FY 2006 President's Budget - A Quick California Glance

The following represents a very quick and not-at-all exhaustive examination of President Bush’s FY 2006 Budget Proposal, released today. As a work in progress, a number of subject areas have yet to be examined, so our apologies for any omissions. A more extensive analysis will be sent overnight tonight.

Department of Justice

SCAAP - The President’s Budget proposes eliminating the State Criminal Alien Assistance Program. The FY 2005 Budget also proposed eliminating the program. The FY05 Omnibus Appropriations bill, however, included $301 million in funding for the program. California’s state and local governments receive about 40 percent of SCAAP funding – $111.9 million of the $281.6 million appropriated in FY2004.

Dept. of Justice State and Local Law Enforcement Assistance Programs - In addition to eliminating SCAAP funding, the Budget proposes eliminating most other State and Local Law Enforcement Assistance Programs and moving funding for the remaining programs to the Justice Assistance Account. The Budget proposes funding Office of Justice Assistance at $1.215 billion. Among the programs proposed for major funding cuts or elimination are Local Law Enforcement Block Grants, Byrne Grants, Community Oriented Policing Services (COPS) Hiring Grants and Law Enforcement Technology Grants, and Juvenile Accountability Block Grants. In total, the Budget proposes that about $1 billion in funding be cut from DOJ state and local assistance programs.

Department of Interior

CALFED - Federal agencies contributing to CALFED projects and programs include: the Department of the Interior’s Bureau of Reclamation, Fish and Wildlife Service, and U.S. Geological Survey; the Department of Agriculture’s Natural Resources Conservation Service; the U.S. Army Corps of Engineers; the Department of Commerce’s National Oceanic and Atmospheric Administration; and the Environmental Protection Agency. The President’s Budget includes a cross-cut budget that combines the proposed total CALFED related funding from these agencies. Across the agencies, the FY2006 Budget proposes $203.4 million in CALFED funding, as opposed to the estimated $154 million in FY05 funding, and the $213.7 million in actual FY04 funding.

Department of Homeland Security

The budget proposes major changes in the structure that provides federal homeland security grant funding to state and local governments, with the primary formula grant program eliminated and replaced by discretionary grants funds for parallel purposes. In doing so, California’s share of total homeland security grant funds would likely increase substantially.

Funding for total state and local DHS programs would decline slightly, from $3.3 billion in 2005 to $3.1 billion in 2006. The budget deletes the $1.1 billion allocated to the State & Local Homeland Security Grant Program (SHSGP) and $400 million for its sister program, the Law Enforcement Terrorism Prevention Program (LETPP). Both programs use a widely-criticized Patriot Act formula that vastly advantages small states over large states (California received $5 per capita in 2004, whereas Wyoming received $38 per capita.)

In its place, the President proposes $1 billion for discretionary grants to states for similar purposes, employing a much smaller (0.25 percent) small state minimum. (Of that amount, $820 million would be for general state & local grants and 200 million for law enforcement grants.) The Administration would retain the $170 million Emergency Management Performance Grants (EMPG) program and the $50 million Citizen Corps program – both of which would still use the Patriot Act formula.

For urban area funding, the Administration proposes $1 billion, which – after being reduced by the same 20 percent – yields funding of 820 million, the same level as in 2005.

By directing 20 percent of both urban and state program funds for spending on law enforcement activities, the budget would effectively maintain the LETPP program at $400 million, while eliminating the old formula. In addition, funds for both urban area grants and state grants would be available to pay for personnel and overtime, a change from current law.

The budget would provide $600 million for "targeted infrastructure protection," including ports, transit, and other infrastructure. The total would replace the 2005 funding that was specifically allocated for port security ($150 million), rail and transit security ($150 million), intercity bus security ($10 million) and trucking industry security ($5 million), with one larger discretionary grant program.

Department of Defense

The President would raise spending for the Department of Defense to $419 billion, a 5 percent increase from 2005. However, whereas defense spending increases typically benefit California because the state’s aerospace firms compete strongly for procurement dollars, the proposed 2006 increase would come not in procurement but in personnel and operations and maintenance. The procurement account would receive $78 billion, which is less than an inflation increase from 2005. The defense R&D budget would be similarly flat, funded at $69.4 billion. Thus, the state is less likely to benefit from the proposed defense spending increase.

California defense procurement advantage is particularly strong in aircraft and missile activities, and some significant reductions are proposed there. In particular, the budget proposes a 2 percent reduction in Air Force procurement, which includes a 6 percent reduction in the F/A-22 Raptor fighter. In addition, the missile defense would be reduced by nearly 30 percent, to a total of $7.8 billion. On a positive note for the aerospace industry, the budget maintains funding for the Navy’s F/A-18E/F Superhornet fighter.

For the Base Realignment and Closure (BRAC) Commission, which this spring is slated to begin the process of assessing base closure proposals, would receive $1.9 billion.


The budget proposes spending $16.5 billion for the National Aeronautics & Space Administration (NASA), an increase of approximately 2 percent from 2005. California perennially receives a large portion of NASA expenditures.

The Administration recommends restructuring NASA funding, moving funds from various science and research accounts into a new, consolidated account for science programs.

National Science Foundation

The National Science Foundation (NSF) would be funded at $5.6 billion, representing a 2.4% increase. While th FY06 funding was received favorably by the foundation, which expected to receive level funding at best, the proposal still leaves the NSF nearly $3 billion behind funding levels promised by Congress in 2002. The budget emphasizes the National Nanotechnology Initiative, funded at $344 million in FY06, and the Networking and Information Technology Research and Development (NITRD), funded at $803 million for FY06, because the programs’ long-term economic benefit.


Department of Education

Over the next five years, President Bush proposes to gradually increase the maximum Pell Grant award amount from its current level of $4,050 to $4,550. Additionally, the budget would retire the current $4.3 billion Pell Grant shortfall in an effort to overcome opposition to the increased maximum award. The new State Scholars Program proposed in the budget, which would provide incentives to students who complete academic requirements at the high school level, would provide an additional $1,000 above the maximum award for qualifying students’ first two years of postsecondary education.

The budget slashes a number of funding sources included from the Higher Education Act, including eliminating TRIO Upward Bound, TRIO Talent Search, GEAR UP and Vocational Education programs. Finally, the budget proposes significant changes to Federal Direct Loan and Federal Family Education Loan (FFEL) programs in order to reduce administrative costs, decrease the federal risk associated with both loan programs, and prevent abuses by financial institutions who provide FFELs.

No Child Left Behind, President Bush’s centerpiece education program, receives a slight increase in funding for FY06. In particular, the budget looks to extend educational standards to 9-12 grades, providing $1.2 billion for a high school intervention program.

Department of Labor

President Bush’s budget eliminates funding for the Migrant and Seasonal Workers program, citing the program’s ineffective rating from its PART assessment. In particular, the budget states that the One-Stop Career Centers provide many of the same services; however, President Bush proposes to fund One-Stop Career Centers at $84 million, representing an $779 million cut to the program’s budget. California, with its large immigrant population and agriculture industry, typically receives a significant share of these funds.

Department of Agriculture

President Bush proposes a 12% reduction to discretionary spending for the Department of Agriculture. Central to the cuts is a lowering of the maximum federal crop subsidy available to an individual recipient, currently set at $360,000, to $250,000. For California, which receives very few crop subsidies because of its concentration of non-subsidized specialty crops, the decrease in federal subsidies may be an indication that the nation is moving toward a more even distribution of federal agriculture dollars. In addition, the budget proposes cutting agricultural conservation funding by 17% and agricultural research by 13%.

Department of Health and Human Services

Medicaid and SCHIP - The budget predicts federal spending of approximately $193 billion for Medicaid Grants to States in 2006. It predicts slightly less than 10 percent of that amount, or $19 billion, will be spent in California. (Because state and local Medicaid expenditures are reimbursed after they are made, a fiscal year’s actual spending is not known until later.)

Two factors reduce California’s share of federal Medicaid funding. First, the state has a relatively young population, with fewer long-term care patients that tend to raise costs. Second, the Medicaid formula employs per capita income instead of poverty to approximate the number of poor persons, an arguably outdated concept that assumes states with low overall income will have fewer poor. That idea works for many states, but not for California, with large numbers of poor and wealthy residents.

The President proposes various changes in the program – some of these changes will be discussed in a later release.

TANF - The federal welfare program now known as TANF (Temporary Assistance for Needy Families) would receive level funding of $16.5 billion in 2005. Of this amount, California continues to receive $3.7 billion, more than 20 percent of the total program.

The budget continues the elimination of TANF the supplemental grants program for population increases, funded at $300 million in 2004 and $191 million in 2005.

Department of Housing and Urban Development

The Administration’s budget cuts discretionary funding for HUD by 11% to $28.5 billion. However, the bulk of the cuts stem from the President’s proposal to consolidate the vast majority of Community Development Block Grants, which in FY05 received nearly $5 billion in funding under HUD, into the Department of Commerce.

Under President Bush’s budget, funding for homeless assistance grants would increase $199 million to $1.4 billion. California receives a large proportion of these funds because of its large homeless population.

Tax Provisions

R&D Tax Credit - The President’s Budget proposes permanently extending the Research and Experimentation Tax Credit, commonly called the R&D tax credit. The R&D credit is scheduled to expire on December 31, 2005. The Budget estimates that the cost to make the credit permanent will be about $27 billion through FY2010. California’s high technology industries strongly support making the R&D Tax Credit permanent to provide certainty in making long-term research and experimentation decisions.


In FY2006, the President proposes a $57.5 billion investment in transportation activities to: ensure safety for the traveling public, improve the Nation's transportation system, and build and maintain US transportation infrastructure. The proposal reflects a one percent cut from the 2005 enacted level of $58 billion.

Transportation Planning Research and Development

The 2006 budget recommends a $9.03 million appropriation to finance research activities and studies concerned with planning, analysis, and information development needed to support national transportation policy formulation.

Federal Aviation Administration

The President’s Budget requests $13.3 billion in Federal Aviation Administration (FAA) budget authority, sub-allocated in the following way: $8.05 billion for operations; $2.5 billion for Grants-in-aid for Airports expenses; $2.45 billion for facilities and equipment programs; and $130 million for research, engineering and development. This represents a $753 million cut from the 2005 enacted amount.


Aviation Safety: The 2006 Budget proposal allots $ billion to fund aviation safety programs broken down as follows: - $ billion, Operations and Personnel, - $ billion, Grants-in-Aid for Airports - $ billion, Information Technology - $ billion, Aviation Research.

Federal Highway Administration

The 2006 FHWA budget includes $35.445 billion in new budget authority (a $5.4 billion reduction from the prior funding level), and $34.7 billion in obligation limitations for federal highway programs. According to the Department of Transportation, California is estimated to receive $3,077,532,000 in total highway planning and construction distributions in 2006 or 9.45 percent of the national total. The Transportation Equity Act for the 21st Century (TEA-21) authorized surface transportation programs through 2003. TEA-21 provided authority for the various programs of the Federal Highway Administration (FHWA) designed to improve highways and bridges throughout the nation. The Bush Administration issued a reauthorization proposal for Congress’ consideration known as the Safe Accountable and Efficient Transportation Equity Act (SAFETEA) in 2003; however since no long term surface transportation plan has been enacted to this date, 2006 budget language remains consistent with TEA-21's funding structure, i.e. highway spending levels will correspond to Highway Trust Fund (HTF) receipts. The fiscal 2006 Budget supports an updated 6-year surface transportation bill reauthorization level of $299 billion ($283.9 billion in outlays) up from the proposed level of $256 billion, through 2009.


Intelligent Transportation Systems (ITS): Under the 2005 FHWA budget, $462.5 million was set aside for research activities, of which $232 million was included for ITS projects. Eight California projects that were highlighted for earmarks in 2005 are eliminated in the President’s 2006 proposal.

Federal-Aid Highways (FAH): $34,700,000,000 is requested for Federal-aid highways and highway safety construction programs for FY 2006. The Administration proposes to slash core highway formula programs by $3.3 billion or 9.8 percent from fiscal 2005 levels, with the most significant cuts handed to the Transportation Research Program (50.2 percent), the Surface Transportation Program (17.8 percent) and Minimum Guarantee (15.4 percent) budgets. The Federal Lands Program, the only core program that grew from fiscal 2005 levels, experienced an increase of $209 million or 28 percent.

Federal Motor Carrier Safety Administration: Federal Transit Administration

The Federal Transit Administration (FTA) provides funding to transit operators, State and local governments and other recipients for the construction of facilities; the purchase of vehicles and equipment; the improvement of technology, service techniques, and methods; the support of region-wide transportation planning; and transit operations. FTA also provides financial assistance to help implement other national goals relating to mobility for the elderly, people with disabilities, and economically disadvantaged individuals.

The 2006 Budget proposes $7.781 billion for transit formula and discretionary programs, the same as FTA’s enacted 2005 funding level, an increase of $134 million. From a total of budget of $6.9 billion in transit formula grants and research, California is estimated to receive $1.3 billion or 18.8 percent of the national total.

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